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USDA Wheat Outlook


15 July 2014

USDA Wheat Outlook - 15 July 2014USDA Wheat Outlook - 15 July 2014


USDA Wheat Outlook

Projected U.S. 2014/15 Wheat Supplies Are Up This Month

Projected U.S. wheat supplies for 2014/15 are raised this month with a sharp increase in forecast hard red spring (HRS) wheat more than offsetting a decrease for hard red winter (HRW) wheat. The HRW crop was damaged by drought and April freezes in the Southern and Central Plains. However, the HRS crop in the Northern Plains has benefitted from abundant soil moisture and cooler than normal early summer temperatures. Yields for durum and other spring wheat are forecast to be above average. Feed and residual use for all wheat in 2014/15 is lowered 15 million bushels to 145 million as tight supplies of HRW wheat and relatively more attractive prices for feed grains reduce feed and residual use. All wheat exports for 2014/15 are lowered 25 million bushels reflecting expectations of large world supplies and strong competition in export markets. Ending stocks are projected 86 million bushels higher. The projected season-average farm price is lowered 40 cents at the midpoint to $6.00 to $7.20 per bushel.

U.S. wheat exports are projected lower this month, despite higher projected U.S. wheat production. Projected 2014/15 world wheat production increased this month, but foreign wheat supplies are almost unchanged due to reduced beginning stocks. U.S. ending stocks are forecast up more than the decline in foreign ending stocks. 

Domestic Outlook 

Ending Stocks for 2014/15 Projected To Increase From June

Ending stocks of all wheat for 2014/15 are projected to be up 86 million bushels from June as total use is lowered and total supplies are raised.

Total projected uses are down 40 million bushels from June because of both lower exports and domestic use. Total wheat supplies for 2014/15 are projected up 46 million bushels from June as higher production more than offsets lower carryin stocks. Total production is projected at 1,992 million bushels, up 50 million bushels from June and down 138 million bushels from 2013/14.

2014 U.S. Winter Wheat Production

The survey-based forecast of winter wheat production, at 1,367 million bushels, is down 14 million bushels from June and down 167 million bushels from 2013. Forecast planted area is up from June, but harvested area is down slightly from June. Expected 2014 harvested area is 32.4 million acres, down 0.2 million acres from June, but unchanged from 2013. The 2014 winter wheat yield is forecast at 42.4 bushels per acre, down 0.2 bushels from June and down 5.2 bushels from the previous year.

2014 Winter Wheat Production Estimates by Class

Hard red winter (HRW) production is forecast at 703 million bushels, down 17 million bushels from June and down 41 million bushels from a year ago. Forecast yield is 32.4 bushels per acre, down from 33.6 bushels in May. Production in 2014 is down from 2013 as a lower yield more than offsets a higher harvest area. Yields were reduced by drought conditions and an April spring freeze. Forecast planted area, harvested area, and yield and year-to-year changes for 2014 from 2013 are 30.4 million acres, up 0.8 million acres; 21.9 million acres, up 1.7 million acres; and 32.1 bushels per acre, down 4.7 bushels per acre, respectively.

Soft red winter (SRW) production is forecast at 458 million bushels, up 4 million bushels from June, but down 107 million bushels from last year. Forecast yield is 62.9 bushels per acre, down from 63.3 bushels in June. 2014 production is forecast lower from 2013 because of both lower harvested area and a lower yield. Forecast planted area, harvested area, and yield and year-to-year changes for 2014 from 2013 are 8.5 million acres, down 1.5 million acres; 7.3 million acres, down 1.6 million acres; and 62.9 bushels per acre, down 0.8 bushels per acre, respectively.

White winter wheat production for 2014 is forecast to total 206 million bushels, unchanged from June, but down 19 million bushels from a year ago.

Desert durum production in California and Arizona is forecast at 12.6 million bushels for 2014. This production is less than the 14.8 million bushels in 2013.

Spring Wheat Production Estimates by Class

Hard red spring (HRS) production is forecast at 520 million bushels, up 30 million bushels from 2013. HRS production is forecast up as higher harvested area more than offset lower yields. Forecast planted area, harvested area, and yield and yearto- year changes for 2014 from 2013 are, respectively, 12.0 million acres (up 1.1 million), 11.7 million acres, (up 1.0 million), and 44.5 bushels per acre (down 1.3 bushels).

White spring production is estimated to total 44.2 million bushels, up 1.0 million bushels from 2013. 

Durum wheat production is forecast to total 59.6 million bushels, down 2.3 million bushels from a year ago. Durum production is forecast down with lower yields. Forecast planted area, harvested area, and yield and year-to-year changes for 2014 from 2013 are, respectively, 1.47 million acres (unchanged), 1.42 million acres, (unchanged), and 42.1 bushels per acre (down 1.5 bushels). 

Projected 2014/15 Supplies Up This Month

The 2014/15 outlook for U.S. wheat supplies is raised 46 million bushels from June to 2,741 million bushels. Beginning stocks for 2014/15, at 590 million bushels, are down 3 million bushels from June. Projected imports, at 160 million bushels, are unchanged from June. Production is forecast at 1,992 million bushels, up 50 million bushels from June.

Projected 2014/15 Supplies Down From 2013/14

Total supplies are projected down 275 million bushels from 2013/14 to 2,741 million bushels. Projected supplies of HRS and durum are up year to year, while HRW, SRW, and white supplies are down. HRW supplies are down the most with lower beginning stocks and lower production. SRW and white supplies are down, also with lower beginning stocks and lower production. HRS supplies are up as higher beginning stocks and production more than offset lower imports. Durum supplies are up as higher imports more than offset lower beginning stocks and production.

Projected 2014/15 Utilization Down This Month

The 2014/15 outlook for U.S. wheat use is projected down 40 million bushels from June to 2,081 million bushels. Food use, at 960 million bushels, is unchanged from June. Seed use, at 76 million bushels, is also unchanged. Feed and residual use is dropped 15 million bushels from June to 145 million bushels because of tight HRW supplies and relatively more attractive feed grain prices. Exports are dropped 25 million bushels from June to 900 million bushels reflecting large world supplies and expected strong competition in export markets.

Projected 2014/15 Utilization Down from 2013/14

Total use is projected down by 345 million bushels from 2013/14 to 2,081 million bushels. Total use of all classes is down year to year with the SRW and HRW classes down the most.

Projected domestic use, at 1,181 million bushels, is down 63 million bushels from 2013/14 as lower expected feed and residual use more than offset higher food use. Projected 2014/15 exports are down 282 million bushels from 2013/14 to 900 million bushels. SRW and HRW exports are expected to be down 145 million bushels and 119 million bushels, respectively.

Projected 2014/15 Ending Stocks Up From June and 2013/14

The projected 2014/15 outlook for U.S. wheat ending stocks is raised 86 million bushels from June to 660 million bushels. These ending stocks are 70 million bushels above the 2013/14 levels. Only HRW ending stocks are down year to year. The ending stocks of the other classes are up, with SRW having the largest increase.

Total 2014/15 ending stocks are expected up 12 percent from 2013/14. Stocks of SRW, durum, HRS, and white are expected up year to year by 74 percent, 54 percent, 13 percent, and 5 percent, respectively. HRW ending stocks are expected down 21 percent.

The 2014/15 Price Range Is Down From June

The projected season-average farm price for 2014/15 is lower 40 cents at the midpoint from June to $6.00 to $7.20 per bushel. For comparison, the seasonaverage farm price for 2013/14 is estimated at $6.87 per bushel.

2013/14 Marketing Year Discussion:

Final Import Numbers Lower 2013/14 Supplies Slightly This Month

Total 2013/14 supplies, at 3,016 million bushels, are down 2 million bushels this month. Total imports are down 2 million bushels from the June projection. The 2- million-bushel adjustment is the net result of small changes for each class.

Projected 2013/14 Supplies Down From 2012/13

Total U.S. wheat supply for 2013/14 is down 115 million bushels from 2012/13 as reduced production and lower beginning stocks more than offset higher imports. Supplies of HRW and durum are down year to year, while supplies are up for the other classes. HRW supplies decreased the most, as smaller production more than offsets higher beginning stocks. HRW production is down from 2012, due partially to the smaller planted area for the 2013 crop, and to a higher abandonment rate and a lower yield because of severe drought and spring freeze damage. SRW supplies were up the most year to year as higher production and imports more than offset lower beginning stocks. SRW production is higher than 2012 because of larger harvested area and higher yield.

Final Export and Seed Numbers and 4th Quarter Stock Numbers Raise 2013/14 Utilization Slightly This Month

2013/14 total U.S. wheat use, at 2,426 million bushels, is up 2 million bushels this month with adjustments to each class. By-class stock changes following the release of 4th quarter wheat stocks resulted in significant changes in feed and residual use for HRW, HRS, and SRW. Final seed use and export numbers resulted in minor byclass adjustments. Projected food use is unchanged this month. In total, 2013/14 seed use is up 3 million bushels, feed and residual use is down 3 million bushels, and exports are up 2 million bushels from June projections.

2013/14 Use Is Up From 2012/13

Total use for 2013/14 is up 12 million bushels from 2012/13 as higher exports more than offset lower domestic use. Domestic use is expected to be down 162 million bushels from 2012/13 while exports are up 175 million bushels. Domestic use is down for 2013/14 primarily because feed and residual use is down from 2012/13. 

2013/14 Total Ending Stocks Down Slightly From June and Down From 2012/13

Total 2013/14 U.S. total wheat ending stocks, at 590 million bushels, are down 3 million bushels from June based on 4th quarter wheat stocks data from the June 30 Grain Stocks report. These total ending stocks are down 128 million bushels from 2012/13.

Total ending stocks for 2013/14 are down 18 percent from 2012/13. Stocks of HRW, white, SRW, and durum are down 31 percent, 21 percent, 8 percent, and 7 percent, respectively. HRS stocks are up 2 percent.

2013/14 Price Is Unchanged This Month

The projected May 2013/14 season-average farm price of $6.87 per bushel is unchanged from June. The 2013/14 price is down from the record $7.77 per bushel reported for 2012/13.

2014 Wheat Progress and Conditions

The July 7 Crop Progress report indicated that 57 percent of the winter wheat acreage had been harvested as of July 6. At this time a year ago 55 percent of the winter wheat crop had been harvested. The 5-year average for the winter-wheat harvest pace is 60 percent.

As of July 6, 47 percent of the spring wheat acreage was headed. Last year at this time 41 percent of the spring wheat crop was headed. The 5-year average for the spring-wheat heading pace is 47 percent.

Spring and winter wheat conditions this year are nearly the same as a year ago at this date. As of July 6 this year, 70 percent of the spring wheat crop is rated good to excellent and only 6 percent is rated poor to very poor. A year ago, 72 percent of the spring wheat crop was rated good to excellent and only 5 percent was rated poor to very poor.

Winter wheat conditions this year reflect the continuing multi-year drought conditions in the Central and Southern Plains. As of July 6 this year, 31 percent of the winter wheat crop is rated good to excellent and 44 percent is rated poor to very poor. A year ago, 34 percent of the spring wheat crop is rated good to excellent and 42 percent is rated poor to very poor. The share of this year’s winter wheat crop rated poor to very poor in Oklahoma, Texas, Kansas, and Colorado is 76 percent, 63 percent, 61 percent, and 40 percent.

USDA Wheat Baseline, 2014-23

Each year, USDA updates its 10-year projections of supply and utilization for major field crops grown in the United States, including wheat. A detailed discussion summarizing the historical forces determining U.S. wheat supply and utilization, along with the analysis underlying the wheat projections for 2014-23, is available at http://www.ers.usda.gov/topics/crops/wheat/usda-wheat-baseline,-2014-23.aspx.

International Outlook

World Wheat Production Projected Up Modestly This Month

Global wheat production in 2014/15 is projected to reach 705.2 million tons, up 3.6 million this month, getting even closer to the all-time record of 714.2 million tons reached in 2013/14. Almost 40 percent of the increase is in the United States, with foreign production up 2.2 million tons to 651.0 million. Several major foreign exporting countries had increased production prospects, namely the European Union, Ukraine, and Australia, while a reduction of wheat production in Kazakhstan is partly offsetting.

European Union (EU) wheat production is projected to reach 147.9 million tons in 2014/15, up 1.6 million tons this month, which is the second largest crop on record. This month’s wheat yield prospects are increased for a number of countries, some of which are among the largest wheat producing countries in the EU. Warmer than normal weather accelerated crop development in Europe, and wheat entered its critical flowering stage about 2 weeks earlier than usual. During this critical period that shifted roughly from June to May this year, some important European wheat areas received abundant precipitation. Consequently, the dryness in June—a month that would otherwise be critical for the wheat yields—did not hurt wheat development, and currently the crop is in very good shape. The largest increase in projected wheat yields and output this month is for Germany, where wheat recovered from spring dryness, and is up 1.3 million tons to reach a close-to-record 25.6 million. Wheat production is also expected to be higher in the Czech Republic, Hungary, Sweden, Slovakia, United Kingdom, and several other countries in the EU. These increases more than offset the reductions for Spain, where the rainy season ended early this year, and rains have been sparse since February; and for Romania and Bulgaria, where heavy rainfall during the harvest is reducing wheat yield expectations, as well as the overall quality of the grain. A small increase (up 0.3 million tons) in wheat production is projected for Serbia, which is not an EU member country. Wheat quality is expected to be affected in Serbia by May flooding and heavy recent rainfall.

Wheat production in Ukraine is projected up 1.0 million tons this month to 21.0 million. This year, the Ukrainian wheat harvest started earlier than usual following a warm winter and spring, with actual yields higher than a year before. The vegetation health index (VHI) for the country is excellent. However, there are a number of possible countervailing factors including reported lodging that followed heavy rains in northern and central Ukraine, as well as disruptive political events in the eastern part of the country.

Australian wheat production is projected up 0.5 million tons this month to 26.0 million, mainly based on increased area, which is projected up 0.2 million hectares to reach 13.8 million, matching the June Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) crop report. Wheat has already been planted, and it appears that timely rains in almost all Australian wheat-producing areas (except for the southern part of Queensland and the northern part of New South Wales) and better expected returns encouraged farmers to expand area planted for wheat, to a near-record level, and partly at the expense of barley. The sufficient precipitation has boosted soil moisture and supported crop establishment, raising yield prospects slightly on the month.

There is also a small 0.3-million-ton increase in wheat output in Brazil, where wheat planted area is projected up 0.1 million hectares to 2.6 million, following the Government’s policy of area expansion in the central-west parts of the country. With a slight increase, yield stays within the trend range this month. In Georgia, wheat production is estimated slightly higher, based on the upward yield revision for 2013/14 reported in the country’s statistical publication.

Partly offsetting the above increases is the reduction of wheat production in Kazakhstan, down 1.0 million tons this month to 13.5 million, with projected yields close to last year’s. The reduction reflects a persistent dryness during the last 6 weeks in the major north and north-western wheat areas of Kazakhstan. The muchneeded rains that have just started there are not expected to fully offset the damage. These counterbalancing factors support a projection of slightly lower than average wheat yields, as the trend in wheat yields in Kazakhstan is flat.

Canadian 2014/15 wheat production is reduced by 0.5 million tons to 26.0 million this month. The decrease is entirely based on a 0.2-million-hectare reduction in area, down to 9.6 million hectares, as reported by the Statistics Canada. Higher than expected winter kill in Ontario winter wheat areas, as well as wet conditions in the Prairies that held back wheat planting (especially in Saskatchewan and Manitoba that together produce about 65 percent of Canada’s wheat), contributed to this area reduction.

Foreign Wheat Supplies Almost Unchanged

Foreign 2014/15 beginning stocks are forecast down 1.7 million tons to 168.2 million, mostly offsetting a 2.2-million-ton increase in foreign wheat production, and limiting the growth in foreign wheat supplies. Changes in beginning stocks are made for a number of countries, and for most of them, they reflect trade revisions for 2013/14. Among the largest trade-related changes are lower beginning stocks in Canada and the EU, down 0.5 million tons each, and Kazakhstan, down 0.4 million tons, with all of these declines being due to higher wheat exports last year. Stocks in Iran are down 0.7 million tons to 5.7 million, reflecting lower than expected wheat imports in 2013/14, though this stock level is still a record high. Due to a wheat production revision for 2012/13, beginning stocks in Australia are projected up 0.4 million tons. Other numerous changes in beginning stocks are largely offsetting.

World Wheat Use Up This Month

Foreign wheat use for 2014/15 is projected up 1.3 million tons to 667.8 million this month. A higher expected share of lower quality wheat in the wheat output of the eastern countries of the EU (Romania and Bulgaria) is expected to boost wheat feeding in the Union, up 1.0 million tons this month. The increase also reflects a small increase in projected poultry production in the EU. With higher wheat supplies, Australia is also projected to feed an additional 0.2 million tons of wheat in 2014/15. Partly offsetting the increases is a 0.5-million-ton reduction in wheat feeding in Kazakhstan, because of lower projected output. Other changes in foreign wheat feeding are offsetting. The largest changes in wheat food use (food, seed, and industrial use) this month are made for Indonesia (up 0.4 million tons), Sudan (up 0.3 million tons), and Morocco (up 0.2 million tons each), all of them reflect higher projected wheat imports. With a reduction in imports for both 2013/14 and 2014/15, wheat consumption is projected lower for Egypt, down 0.4 million tons (both feed and food use). A number of trade-driven smaller changes in wheat consumption have been made for several countries.

Global Ending Stocks Slightly Up, Foreign Stocks Reduced

With a 2.4-million-ton increase in projected U.S. ending stocks, world wheat ending stocks for 2014/15 are projected up 0.9 million tons this month to 189.5 million, while foreign stocks are down 1.4 million. The largest decline in ending stocks is projected for Canada, down 1.0 million tons to 7.0 million. The reduction absorbs both lower beginning stocks and a wheat production cut. Ending stocks are reduced in Iran, down 0.7 million tons reflecting lower beginning stocks (see above). Stocks are also projected down 0.4 million tons in the EU, as lower beginning stocks and imports, together with higher projected feed use, more than offset a wheat production increase. Partly offsetting are upward revisions in wheat ending stocks in Ukraine, up 0.5 million tons, as the country’s production increase is only partly offset by higher exports, as well as a number of smaller upward and downward revisions, based on changes in the countries’ wheat balances.

World Wheat Trade Largely Unchanged, Shifts in Exporters’ Shares Expected

Global trade in 2014/15 (July-June trade year) is almost unchanged, as it is slightly reduced to 151.7 million tons, down 0.3 million from last month’s projection. The largest change in projected wheat imports this month occurs in the EU, where abundant low-quality wheat supplies coming from Romania and Bulgaria are expected to result in lower wheat imports (down 0.5 million tons to 5.0 million) from outside the EU. Slightly lower imports (down 0.2 million tons) are also projected for Egypt, where bread subsidies are being reduced, leading to lower demand for wheat, and for Mexico which has higher wheat supplies (coming from an increase in beginning stocks). Higher imports are projected for Sudan, Indonesia, and Nigeria (up 0.2 million to 0.3 million tons each), supporting higher wheat food consumption in these countries. Other smaller adjustments in imports for several other countries are largely offsetting.

Some shifts in expected market share among major wheat exporters are projected this month. Projected 2014/15 wheat exports by Kazakhstan are cut 1.0 million tons, to 6.0 million, due to reduced production. At the same time, with increased wheat output, exports are projected higher for Australia, Ukraine (up 0.5 million tons, each), and Serbia (up 0.2 million tons). Exports also inched up for Nigeria, and down for Azerbaijan.

U.S. Wheat Exports Reduced Despite Higher Production

Despite higher total projected wheat production this month, U.S. wheat exports for the 2014/15 July-June international trade year are projected lower this month, down 0.5 million tons to 25.0 million. A projected sharp increase in U.S. spring wheat production this month more than offset a reduction in the output of winter wheat. However, about two-thirds of total U.S wheat exports typically comes from winter wheat varieties, both hard and soft wheat, and lower projected supplies are expected to weigh on wheat exports. An additional reason for the U.S. export reduction is that this year’s soft low-quality wheat is abundant in the world and world prices are declining. This is expected to intensify competition and put additional pressure on U.S. exports in the soft wheat segment of the market.

As of July 3, 2014, outstanding export sales were 6.0 million tons, down 1.8 million tons from a year ago. As competitors’ new-year wheat production becomes available, U.S. export sales and shipments are expected to decline even further.

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